On Friday, the British Pound has been staging a recovery since an extension to Article 50 was offered by the EU. The British currency has made particular gains against the Euro, after weaker-than-expected Eurozone Purchasing Managers’ Index (PMI) surveys came to light. The economic data showed concerning states of the manufacturing sectors in both Germany and France, while the Eurozone manufacturing PMI contracted further in March, coming in at 47.6, down from 49.3, and optimistic forecasts for 49.5.
Yesterday: The British Pound has been softening in Thursday’s European session as Brexit chaos took hold once again. Sterling hit a one-week low against the US Dollar today, reaching levels of $1.3105. This is the lowest level since MPs decided to seek a Brexit extension last week.
Theresa May is continuing her mantra of delivering Brexit–‘What’s important is that parliament delivers on the result of the referendum and that we deliver Brexit for the British people,’–yet concerns are increasing that Britain may, in fact, leave with no deal next week.
What happens next is anybody’s guess. Theresa May is attempting to get her deal through once again, despite it being rejected twice, running down the clock all the while. French President Emmanuel Macron has said that if MPs don’t support a deal then a no-deal scenario is likely.
UBS Wealth Management Economist Dean Turner commented, saying:
‘Sterling has come under pressure as the latest phase of the process unfolds. It therefore still feels prudent to tread cautiously while the news is fast-flowing. We refrain from taking directional views on the currency, while hedging downside risk to sterling seems sensible.’
British Pound Under Pressure as Theresa May Attempts to Get Her Deal Approved
Meanwhile, reports suggest that even if Thersa May did get her deal through, the European Union wouldn’t grant a three-month delay, and may only offer an extension until May 22nd.
The Guardian reports one source as saying:
‘The 22nd of May has to be the limit. The reason is that there has got to be a very clear message from the European Council. Yes to a short extension on condition that the Prime Minister passes her deal through the Commons. But beyond that it is utterly complicated. It cannot be done without British MEPs having been elected.’
An extension would need unanimous support from EU leaders.
Bank of England (BoE) Leaves Rates Unchanged to Protect Against Brexit Chaos
Meanwhile, the Bank of England chose to, unsurprisingly, leave interest rates on hold this month while Brexit is ongoing. However, the central bank believes that around 80% of British firms are prepared for a hard Brexit, should it come to that next week. However, should a hard Brexit happen, it’s likely the British Pound will sink and supply chains will be disrupted.